Samarco restart a step closer

Vale (NYSE:VALE) and BHP Billiton (ASX:BHP) have signed a non-binding agreement to allow their joint venture Samarco use the Brazilian miner’s Timbopeba pit to deposit tailings when it resumes operations.

Under the deal, which will become definitive pending commercial negotiations and government approvals, Samarco will supply Vale an undisclosed amount of non-processed iron ore for a certain period after mining restarts.

The Samarco iron ore mine has been shuttered since a tailings dam failed in November 2015, triggering a flooding that killed 19 people.

Samarco plans to use its own tailings pit – Alegria Sul – for two to three years once it receives the necessary permits, but having access to the Timbopeba pit could allow the firm to operate for several years without a new tailings facility, Vale and BHP said in a joint statement.

The Samarco iron ore mine has been shuttered since a tailings dam failed in November 2015, triggering a flooding that killed at least 19 people, hurt the environment and led to the filing by Brazilian authorities of criminal charges against 21 officials and employees of BHP, Vale and Samarco.

A restart of operations is crucial for Samarco to reduce its debt, pegged at $3.7bn. The venture, which has had no cashflow since the accident, even missed in September an interest payment on a $500 million bond.

Last month, a Brazilian court ordered BHP and Vale to pay an initial $350 million to help clean up what is considered the country's worst environmental disaster.